Casino cosiness not a good look with punters

By Sean Nicholls

3 November 2012 — 3:00am

When the O'Farrell government unveiled its new policy for dealing with major infrastructure projects brought to it by the private sector - so called unsolicited proposals - in January it barely raised an eyebrow.

That's largely because it didn't make much of a fuss; the policy was added to the Department of Premier and Cabinet website with little fanfare.

Barangaroo ... soon to inherit a hotel and casino. Above, an artist impression of the site.

Photo: Supplied

The first real focus came in July when the Roads Minister, Duncan Gay, announced the government was examining a proposal by Transurban to build a tunnel between the M2 and F3 motorways.

But even then the policy - via which the government can choose to deal exclusively with one company on a project without going to tender - didn't provoke controversy.

The news that it will be applied to James Packer's plan for a $1 billion hotel and high roller casino at Barangaroo has changed all that.

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Suddenly the O'Farrell government is battling accusations it is bending over backwards to accommodate private sector interests at the taxpayer's expense.

The fact is that governments are inherently conflicted when it comes to the issue of public private partnerships and in particular the unsolicited proposals process.

There's no question there are real issues of commercial confidentiality in play when a private company brings an idea to government asking it to become a partner in the project.

But a government also needs, first and foremost, to be seen to be committed to the public interest. Any whiff that it is favouring the private sector over the interests of the voters is political poison.

In the case of the Packer proposal, that risk is particularly apparent.

From the time Packer's plan was unveiled in the media earlier this year, O'Farrell has walked a fine line between supporting what he genuinely believes is a project that will be good for Sydney - the six-star hotel - and reinforcing the need for proper process.

Unfortunately for the Premier, the government's clash with Crown's biggest competitor, Echo Entertainment, during the Star casino scandal left many interpreting O'Farrell's support as taking some revenge.

The likelihood that a second casino licence to facilitate the project would not be put to tender only strengthened that impression.

In August last year O'Farrell announced his preference for the controversial ''hotel over the harbour'' at Barangaroo to be relocated onto the main site.

Barangaroo's developer, Lend Lease, had approval for the hotel, but all the signs are it would agree to the Premier's wish.

Enter Packer, who stitched up a deal with Lend Lease, to build the hotel in its new location at Barangaroo South. Now he is insisting that without the revenue a casino will provide him, the project cannot proceed.

The unfortunate upshot for O'Farrell is that if he does anything that leads to Packer not getting his casino - by refusing to issue a second licence or putting it to tender - he will kill the deal between Lend Lease and Packer.

And he potentially ends up back at square one in a fight with Lend Lease about moving the hotel facing costly legal action or a humiliating backdown if it refuses.

One of the O'Farrell's government's greatest advantages over the Labor opposition remains the perception that when in power it got too close to the private sector - in its case, the property development industry - at the expense of the public interest.

But by allowing himself to be forced into dealing exclusively with Crown and not putting the casino licence to competitive tender, O'Farrell is wide open to the charge that he is committing the same offence.